E-commerce superstar Amazon.com, Inc. (AMZN) has fallen more than 3.5% ahead of Friday’s opening bell after beating moment quarter revenue estimates but lost earnings expectations by a wide margin. The company also issued in line guidance, disappointing the momentum crowd while stoking investor fears that CEO Jeff Bezos will set aside capital back to work by a long shot than building cash hordes that would underpin share prices.
The stock traded above $1,000 per share for the first time in its public history in May but has made microscopic or no progress since that time, with shares now selling off within 11 points of that historic high-water heed. The loss of momentum is not surprising because this price level marks meaningful psychological resistance that could sign a long-term top ahead of tougher times for Amazon shareholders. (See also: Amazon Wobble Creates Ripples Across Worldwide Stock Markets.)
AMZN Long-Term Chart (1997 – 2007)
The stock came public at $1.97 (adjusted for three stock splits) and turned sharply higher two months later, entering an uptrend that went parabolic during the dotcom bubble. It topped out at $110.63 in April 1999 and sold off, building support in the low $40s ahead of a December breakout attempt that attracted intense selling pressure and a major reversal. The subsequent decline relinquished the majority of post-IPO gains, bottoming out in the single digits a few weeks after the attacks on Sept. 11, 2001. (For more, see: whether You Had Invested Right After Amazon’s IPO.)
A bounce into 2003 stalled just above $60, marking a recovery high that was not challenged until the discontinue of the mid-decade bull market in 2007. It broke out in July of that year and surged into the 1999 high, where heavy resistance ended the six-year advance, yielding a downturn that held up surprisingly well during the 2008 economic collapse. Amazon stock bottomed out at $34.68 in November, posting a higher long-term low ahead of a recovery wave that caught fire after mounting decade-long resistance in October 2009.
The recent uptrend unfolded in multiple waves that attracted strong institutional buying interest, lifting the stock through a series of recent highs into the January 2014 peak at $408.06. It then entered an intermediate correction, carving a broad rectangular sample with support near $285, and turned higher at the start of 2015. That rally impulse signaled the opening shot of the most prolific period in the stock’s public history, generating a powerful trend advance that reached quadruple digits in the moment quarter of 2017. (See also: Behind Amazon’s $1,772% Rise in 10 Years.)
AMZN Short-Term Chart (2015 – 2017)
Two-year price action has carved a rising wedge sample with resistance at $1,000. The stock pierced that level into July 2017 in a notable point to of strength, but the bearish post-earnings reaction will now force a retest that will set off multiple sell signals whether the price fails to hold recent support. Traders should preserve in intellect that this level denotes a price zone by a long shot than a narrow line in the sand, requiring a breakdown to undercut $950 to generate more dependable bear signals.
The trading range that started in 2014 yielded an April 2015 breakout that generated gains in excess of 50% into the fourth quarter. The rally paused just below $700 in December, yielding a V-shaped decline and bounce that washed out a large supply of sellers, setting the stage for impressive gains into May 2017. It stalled at $1,016 at that time and eased into a triangle, breaking out in July and hitting an total-time high at $1,083 ahead of this week’s earnings. The pre-market decline has now penetrated recent triangle support by eight points, setting up critical price action after the opening bell. (For more, see: Tech Sector Depresses European Shares on Busy Earnings Day.)
The Bottom Line
Amazon stock is testing the $1,000 level after an aggressive sell-the-news reaction following moment quarter earnings. The lack of progress since the stock first tagged that level in May could sign the first phase of a long-term top, but committed bulls should believe several opportunities to shake off bearish pressure. (For additional reading, check out: Birkenstock CEO to Amazon: ‘This Is a Middle Finger to total Brands’.)
<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>